Jonathan Fenby

Chairman, China team and Managing Director, European Political Research
+44 20 7246 7880

Featured China research

China Global: Trump and Xi see off the storm – for the moment China Global: Trump and Xi see off the storm – for the moment, Jonathan Fenby, 10 Feb 2017

Recent China research

* China Watch: Strong global growth a tailwind for China's deleveraging, Michelle Lam, Trey McArver, Larry Brainard, 14 Dec 2017
* China Watch: Outlook for 2018, Larry Brainard, Trey McArver, Michelle Lam, 7 Dec 2017
* China Perspective: North Korea scores, US stuck, Jonathan Fenby, 1 Dec 2017

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Recent blog posts

Gas-to-gas competition emerging in China Gas-to-gas competition emerging in China, Stephen O'Sullivan, 17 Aug 2017
Chinese gas import dependency continues to increase Chinese gas import dependency continues to increase, Stephen O'Sullivan, 25 Jul 2017
China gas reform has not gone far enough China gas reform has not gone far enough, Stephen O'Sullivan, 18 Jul 2017
China’s gas reform – not as far or as fast as we had hoped China’s gas reform – not as far or as fast as we had hoped, Stephen O'Sullivan, 5 Jul 2017

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The net closes round Zhou Yongkang and his network

The sacking of China’s former Vice-Minister of the Public Security Office and the prosecution of an alleged “Mafia boss” tycoon in Sichuan announced this week have tightened the noose around former security boss Zhou Yongkang, who would be the most senior target of Xi Jinping’s anti-corruption campaign. The widening investigation forms part of Xi’s drive to bolster his political power, but is also indicative of the scope and scale of networks built up around major political figures in the People’s Republic.(See my 18 December 2013 blog posting Trapping the tiger: corruption campaign collateral. Subscribers see also my 20 February research note on wider political scene, How Xi Jinping’s China works.)

Li Keqiang joins in. Like other Zhou associates, the former Vice-Minister, Li Dongsheng, is accused of “serious disciplinary violations”, which usually means corruption. Li Dongsheng was appointed to the vice-ministerial post in 2009, while Zhou Yongkang was the Politburo Standing Committee member responsible for internal security and legal affairs; he stepped down in the leadership transition in November 2012. (For the Zhou case, see my blog of 18 December 2013.)

To give new top-level impetus to the anti-corruption campaign launched by Xi Jinping after he became Communist Party General Secretary in the transition, state media yesterday gave prominent coverage to a speech two weeks ago by Prime Minister Li Keqiang in which he vowed “complete transparency in government affairs” and urged auditors to be “brave in thoroughly probing [government] violations”.

Zhou’s men fall one by one. Zhou himself has not yet been formally mentioned in connection with corruption investigations, but the number of his associates who have been has risen steadily. Among prominent figures in the firing line are Ji Wenlin, former Vice-Governor of Hainan province, and Jiang Jiemin, who headed the state enterprise supervisory body SASAC after rising to the top of the oil and gas industry, which came under Zhou’s purview after his time at the energy giant CNPC.

Six senior executives at CNPC and its listed subsidiary Petrochina are also under investigation, as are two top officials promoted in Sichuan when Zhou ran the province, Li Chuncheng and Li Chongxi. In addition, Zhou’s son, Zhou Bin, is reported by the South China Morning Post in Hong Kong to be in detention, accused of illegal dealings in Sichuan and the oil industry.

Going for the Sichuan tiger. Zhou is vulnerable, as a former ally of the fallen Chongqing party chief Bo Xilai and a potential centre of opposition to Xi and the new leadership with his extensive network in the security forces and the energy sector.

The drive against “tigers and flies” promised by Xi – i.e., against the rich and powerful as well as against minor offenders – has also led to the prosecution of Liu Han, a 48-year-old Sichuan mining tycoon, and three dozen of his lieutenants, who together controlled 70 companies and amassed assets of Rmb40 billion (US$6.6 billion). Xinhua said that the group was responsible for nine deaths as it operated in “Mafia gang style” with several hundred cars including Rolls-Royces, Bentleys and Ferraris.

Money and drugs. Liu, a Zhou associate, had been under investigation since last March. His main firm, the Hanlong conglomerate, has businesses ranging from solar energy to mining and employs 12,000 people in China and abroad. It was given the all-clear by the Foreign Investment Review Board to take over Australian iron ore miner Sundance Resources in 2012, but the deal fell through after Hanlong failed to come up with the money and China Development Bank withdrew its backing.

Liu held provincial political posts. Xinhua said he was “a powerful patron” who exerted influence in the appointment of officials, supplying them subsequently with money, gifts, drugs and lavish parties, and getting protection in return. The Beijing News reported that Zhou’s associate Li Chongxi may have been among those whom he looked after.

The logical final step looms. The team investigating Zhou reports direct to Xi Jinping and has recruited high-level Beijing police officers to speed up the interrogations, the Post reported. By dismantling the network of Zhou supporters, Xi and his police task force have made the former national security chief vulnerable. The logic leads to his being investigated and possibly tried, as was Bo Xilai. That would be the highest-profile case since the trial of the Gang of Four after the Cultural Revolution. Xi, who casts himself in the Deng Xiaoping mould, may relish the comparison – with Zhou Yongkang taking the place of Madame Mao Zedong.

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